RealtySouth, the largest real estate firm in Alabama, has been ordered to pay $500,000 for inadequate disclosures that could leave consumers unaware of their rights to choose service providers during the home-buying process.
The Consumer Financial Protection Bureau (CFPB) says these practices illegally benefited TitleSouth LLC, an affiliated company owned by the same holding company that owns RealtySouth.
“Disclosures give consumers the power to make informed financial decisions, and buying a house is among the biggest financial decisions most people ever make,” said CFPB Director Richard Cordray. “The Consumer Bureau will continue to take action against companies that attempt to modify disclosures and keep consumers in the dark.”
According to CFPB, RealtySouth violated the Real Estate Settlement and Practices Act (RESPA), which protects consumers during the home-buying process by prohibiting kickbacks for referrals of real estate settlement services.
RealtySouth’s preprinted form purchase contracts, which its agents provided to homebuyers preparing to make an offer on a home, either explicitly directed or suggested that title and closing services be conducted by its affiliate, TitleSouth.
While RESPA allows real estate companies to refer their customers to affiliated businesses, the law requires them to provide consumers an “Affiliated Business Arrangement” (ABA) disclosure that clearly states their right to shop around for a better price and that they are not required to use the affiliated company.
The disclosure RealtySouth gave consumers did not comply with the law, agency says, and did not properly highlight consumers’ rights. In addition, the required language was buried in a section of text that also made marketing claims about the company’s prices.
Inn addition to paying a civil penalty of $500,000, is ordered to ensure that its disclosures comply with RESPA, and ensure that its training materials emphasize that its agents cannot require the use of affiliates.